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Daily Reports @ WJR

WJR August 2003 reports

September 2, 2003

There’s no workweek like a short workweek, and it looks like we’ll get this one off to a good start.

The two big news items that will drive the market today will relate to manufacturing activity and jobs. At ten o’clock, the August ISM Index is expected to reflect expansion in manufacturing activity, to a level of 53.8. Anything above 50 indicates an expansion. That would be a good thing.

A better thing, especially for manufacturing workers without a job, would be news that corporate downsizing has stopped and that more jobs are on the way. For that, we’ll turn to outplacement firm Challenger Gray and Christmas. Their August layoff report is due out later today.

Semiconductor chip sales are up for the fifth month in a row. Sales up 3%, and prices for those chips are up as well.

What you see is what you get with the futures. There’s not much of an adjustment to fair value this morning, and although the futures are weaker than they were during the six o’clock hour, were still looking for prices to rise at 9:30. S&P futures are up about 4 points, the Dow futures are up almost 30, and the Nasdaq is looking to open up about 8 points.

August 29, 2003

We’ve had a beach-ball market for the past few weeks. It’s like pushing a beach-ball under water – it just keeps coming back up to the sur>

Personal income and consumption numbers for July, the Final Consumer Sentiment number from the University of Michigan and the August Chicago Purchasing Managers Index all come out within the next couple of hours. No surprises are expected. The highlight of the day may be a speech Alan Greenspan is giving in Wyoming. Please hold back your excitement. I don’t expect Madonna to show up and kiss him.

Stocks traders theoretically >

Asian markets up one percent overnight, European markets are up a touch as well. Our beach-ball could start the morning just under the sur>

August 28, 2003

Bill Gates speaks to the Detroit Economic Club today. If you’re going, don’t open your napkin if it has an attachment. You wouldn’t want to catch a virus.

We pay attention to a lot of economic numbers every week. Most of them give us clues as to how well the economy is likely to do. Today’s the day we get the revised report card on the second quarter of 2003. The prelimary figure, released a month ago was 2.4%. In fifteen minutes, it’s expected that it will be revised upward to 2.9%. You may say "Yeah, that’s great – but I still can’t find a job!" The thinking is that if the economy can grow at a three to four percent clip for a few quarters in a row, job growth won’t be far behind.

Earnings reports were solid across the board this morning. Three companies in three different industries each beat estimated earnings by 2 cents per share. PetSmart, Chicos FAS and Michaels Stores all with smiles this morning.

Stocks in Europe are up. The futures are showing little direction in front of that GDP number at 8:30 Adjusted for fair value, S&P futures are up less than a point, the Dow futures are up 5, and the Nasdaq futures are about 2 points above fair value.

August 27, 2003

We were off to a pretty ugly start yesterday, but about 1:30 in the afternoon, the U.S. stock markets suddenly turned it around to finish with respectable gains on the day. Good economic numbers and some solid earning reports turned the tide.

The tide of mortgage refinancing continues to leave the shore. The average rate on a 30-year loan held steady at 6.22% last week according to the Mortgage Bankers Association of America. But refinancing activity dove for the eighth straight week, down over 21% last week alone.

If for some reason you agreed to pay a load, or a commission to buy a mutual fund in the past, you may have some money coming your way. The NASD has ordered brokerage houses to make send checks to their customers who weren’t given appropriate discounts on those commissions. An NASD review found that in one third of the cases it examined, customers were overcharged, the average amount of this slight-of-hand cost the investor 364 dollars.

Asian markets were mixed overnight. European markets are clinging to small gains at his hour. It looks like we’ll get off to a slightly lower start once again. Adjusted for fair value, S&P futures are down less than a point, the Dow futures are down 8, and the Nasdaq futures are about 1 ½ points below fair value.

August 26, 2003

We’re fighting a couple of stock market traditions this week. As I mentioned yesterday, stocks often drop in the week before Labor Day. Add to that the fact that stocks tend to drop an average of ¾ of a percent between ten and twenty days after a big blackout.

We have a bunch of economic reports on the way today that may change that average. The July Durable Goods Report rolls at 8:30 this morning. At an increase of one percent it’s expected to be a lot weaker than the June Report. However, at 10 o’clock the Conference Board’s report on consumer confidence is expected to show a slight uptick, to a level of 79.7. Add to that the New Home Sales Report at 10 o’clock, and traders will have a lot to chew on as the day unfolds.

Intel’s CEO said yesterday that the recent surge in chip sales might just be a makeup for spending that didn’t happen in the second quarter because of SARS. So it’s possible that that third-quarter surge was just a temporary phenomenon.

And on that note, the futures are pointing to a lower open again this morning. Adjusted for fair value, S&P futures are down 2, the Dow futures are down 18, and the Nasdaq futures are about 6 points below fair value.

August 25, 2003

The week before Labor Day is usually a pretty tough week for stock prices. Trading volume is light, a lot of people will be getting in that last summer vacation. If we didn’t have Bill Gates coming to town Thursday, there’d be nothing to do but clean out a couple hundred virus laden emails from your Outlook in-box.

Mortgage interest rates rose steadily all last month. The impact probably won’t hurt the July existing home sales number much, since those sales were already in the works. We’ll find out at 10 o’clock. It’s expected that 5.91 million home changed hands. That would be up slightly from the June level.

Walmart has raised their August sales projection this morning. They are now looking for a 4 to 6 percent same store sales increase. They had been looking for 3 to 5 percent.

In London markets are closed. Most other markets overseas are lower, but most are off less than 1 percent. We’re going to start lower as well. Adjusted for fair value, S&P futures are down 3, the Dow futures are down 27, and the Nasdaq futures are almost 7 points below fair value.

August 22, 2003

A lot of investors like to pick stocks with high dividend yields, especially under the new tax law. That’s great – as long as the company keeps paying its dividend. Yesterday Schering-Plough had a yield of more than 4%. This morning, their 68-cent per year dividend has been cut to 22 cents. Schering warned about future earnings, and they’re cutting another 1,000 jobs.

Last night a bunch of retailers reported a surge in sales. Shares of Gap have doubled since October and last night they announced quarterly profits of 22 cents per share, up from 6 cents year ago, and a penny ahead of estimates. Nordstrom beat estimates by 9 cents per share, and Foot Locker was upgraded by a major brokerage firm.

Tivo lost less than expected last quarter. Including after-hours trade, Tivo stock gained over 20% yesterday.

Japanese stocks pulled back a bit overnight, but Hong Kong was strong again. European markets are mostly up just a bit. Our futures are about as flat as Lake St. Clair on a windless night. Adjusted for fair value, S&P futures are down a point, the Dow futures are up 2, and the Nasdaq futures are just a fraction below fair value.

August 21, 2003

People have found a way to lose weight with Krispy Kreme Donuts. If you sold the stock short during the past couple of years, you are definitely much lighter in the wallet. The stock has nearly doubled in price since early February. It’s up over 400% since April of 2000. This morning, Krispy Kreme beat earnings estimates for the quarter again, and raised their projected growth rate for the years to come. Revenue was up 41%, income up over 46%. Carbohydrates were up 48%. No, they weren’t, I just made that up.

The rest of this morning’s news is pretty good, as well. Joseph A. Bank earned almost 30% more than expected, Sharper Image raised their guidance, and Intel says there are signs that corporations are starting to enter a PC replacement cycle. That, and yesterday’s price cut announcement by Dell should make for some interesting action in tech stocks today.

Overseas markets are doing well, many up 1 to 2 ½ percent overnight. Our futures have continued to strengthen throughout the morning. Adjusted for fair value, S&P futures are up more than 4 points, the Dow futures are up 53, and the Nasdaq futures are about 10 points above fair value.

August 20, 2003

The string of positive earnings announcements from big corporations was interrupted last night. Hewlett-Packard blamed slack demand for personal computers and discounted pricing, as they made 23 cents per share last quarter. That’s three cents short of estimates, and has Hewlett stock down about 10% in pre-market trading this morning.

The last two big monthly economic reports of the week roll out today. The more important of the two will be the July Leading Economic Indicators. They are expected to be up 4 tenths of a percent. That would be up from 1 tenth of a percent last month. Look for that report at about 10 o’clock this morning. The August Philadelphia Fed Survey later today is also expected to reflect positive trends for the economy.

The Nasdaq 100 index is up almost 8% over the last 7 trading sessions. The Hewlett-Packard news may knock the Nasdaq freight train off the tracks this morning.

At this point it looks like a pretty sloppy market at 9:30. Adjusted for fair value, S&P futures are down more than 3 points, the Dow futures are down 32, and the Nasdaq futures are about 9 points below fair value.

August 19, 2003

Home Depot beat earnings estimates by 2 cents per share, and that was before I spent all that money on mosquito fighting equipment last night. Staples made 18 cents last quarter, also beating estimates by a couple pennies per share.

Since the internet bubble deflated, people have tried to forecast when technology spending will pick up. We’ve had plenty of forecasts, but not much recovery. But a lot of computers that were purchased to guard against the Y2k scare are four years old now. Hewlett Packard is betting that now’s the time to upgrade. They will report earnings later today but they are rolling out 158 new products, designed to catch the interest of gadget freaks everywhere.

Later this morning the University of Michigan finally reports their Consumer Sentiment number. Expect a reading of 91.2. They were supposed to report that number last Friday, but had to hold us in suspense until the lights came back on.

It looks like a very slightly positive open on the way. Adjusted for fair value, S&P futures are a fraction, sitting right on the 1,000 mark. The Dow futures are up 5, and the Nasdaq futures are about 4 points above fair value.

August 18, 2003

Getting a "snow day" is not unusual in these parts. Getting one in the middle of August? This may take some time to digest.

The stock market took the big blackout in stride Friday, and it looks like we’ll get off to a good start again this morning, as the futures took quite a surge about a half-hour ago.

No power shortage for Asian stocks. In Japan, the Nikkei Index is over the 10,000 level for the first time in about a year. That index is up over 8 percent in the past week and a half. The Hang Seng Index in Hong Kong is also north of 10,000. European markets are narrowly mixed at this hour.

Lowes is out with earnings, and the news is good. Lowes made 75 cents per share last quarter. The expectation was only 69 cents. And that was before anyone walked in looking for a generator. They also raised guidance for the rest of the year. Later today Toys R Us and Agilent report in. Walmart says that last week’s sales were at the high end of estimates.

It looks like the stock market should be at full power at 9:30. Adjusted for fair value, S&P futures are up almost 4 points, Dow futures are up 32 and Nasdaq futures are more than 6 points above fair value.

August 14, 2003

It’s the time of year when stock people talk about "the summer doldrums." While the stock market was a snoozer yesterday, the bond market again had an interesting day. Especially interesting if you are short long-term bonds. The sell-off that renewed with the Fed announcement Tuesday accelerated yesterday. Yields on the ten and thirty year Treasury Bonds are just about back to their peaks of August 1st, which just about equal to their levels of one year ago.

So far the collapse in bond prices hasn’t bothered the stock market much, but if it continues unabated, those lower bond prices may start to draw some yield-hungry money out of stocks.

In fifteen minutes we’ll find out how producer prices held up in July. The consensus estimate is an increase of 2 tenths of one percent. Anything much north of that could be more bad news for the bond market. After the market closes today, we’ll get earnings from Dell, which should set the tone for tomorrow’s open. In front of that producer price number, today’s open is looking good.

Asian markets up nicely overnight. European markets also doing well at this hour. Adjusted for fair value, S&P futures are up more than 4, Dow futures are up 29 and Nasdaq futures are 5 points above fair value.

August 13, 2003

Well, we’ll see if they’re right. The Federal Reserve Open Market Committee held rates steady yesterday, basically promised to not increase rates until at least next year, said that the economy seems to be improving, but deflation is still more likely than inflation. They’ve essentially handcuffed themselves to the current fed funds rate. If we do get a fourth quarter pick up in the economy and/or the inflation rate, long-term bonds, which sold off again after yesterday’s announcement, could get clobbered again.

And just in case you thought rising long-term interest rates weren’t having much impact, the Mortgage Bankers Association said this morning that last week mortgage refinancing applications dropped by 20%. New home purchase applications were down by more than 10%.

Last week Walmart raised their earnings guidance, telling us that they would make 52 cents per share last quarter. And guess what? They made 52 cents per share last quarter.

July retail sales will be reported in about 10 minutes. Expect a 1% increase, but only 6 tenth of a percent went you remove auto sales.

In front of that number, the futures are indicating a flat market at the open. Adjusted for fair value, S&P futures are up less than a point, Dow futures are down 8 and Nasdaq futures are 2 points above fair value.

August 12, 2003

I’ve never sat in on a meeting of the Federal Reserve Open Market Committee. I’m sure that occasionally they can get pretty wild. You’ve got the party animal Alan Greenspan. Add eleven other bankers and economists. I’ll bet they even have caffeinated coffee brought in. Yes sir, pretty exciting stuff.

But today’s Fed meeting may not measure up in terms of entertainment value. Absolutely no one expects a change in interest rates. The only open question is whether the Committee’s statement on the economy will again infer that the Fed is worried about deflation.

There was one line in the Fed’s statement after the June 26th meeting that sent the bond market into a huge selloff. If you have long-term bonds in your portfolio, start hoping that today’s statement drops that deflation malarkey. If it does, the bond market should firm up in the weeks to come.

We’ll find out at 2:15 this afternoon. At this point we’re once again looking for another little rally at the open. Adjusted for fair value, S&P futures are up more than 3, Dow futures are up 25 and Nasdaq futures are 5 points above fair value.

August 11, 2003

Today should be the quiet day of the week. Tomorrow, Alan Greenspan brings his eleven piece orchestra to Washington for another encore. It IS possible that they’ll change their tune and adjust interest rates. It is also possible that the Detroit Lions will go 23 and 0 this season. By the way, if the Lions DO go 23 and 0, Steve Mariucci will automatically be recalled to California and appointed Governor.

California’s corporate soap opera continues. Oracle has once again extended their takeover bid for PeopleSoft – this time until September 19th. Oracle was upgraded to a "buy" by a major brokerage firm today. Adobe was also upgraded by a different brokerage firm.

On the earnings front, Sysco Corporation – that’s the food service company, not the computer network router company, beat estimates by 2 cents per share.

Asian markets were up about a percent and a half overnight. European markets are mostly positive, but all by less than one percent. Our futures are up a little, but they are not as high as they were a couple of hours ago. Adjusted for fair value, S&P futures are up less than 2, Dow futures are up 17 and Nasdaq futures are almost 3 points above fair value.

August 8, 2003

It’s one of those lazy, hazy, not so crazy days of late summer. No big earnings or economic announcements are scheduled for the rest of the day. Go out to lunch, take the kids to see "Finding Nemo" for the third or fourth time.

Nemo’s creators over at Pixar had a great quarter, and that’s no great surprise. Pixar made 34 cents per share versus an expectation of 22 cents. As far as a place for lunch, it looks like Ronald McDonald is selling a lot of those premium salads. McDonald’s same store sales were up 4.2 percent for the month. That’s certainly a change in direction from a year ago.

Don’t look now, but the 10 year Treasury Bond yield has dropped 3 days in a row now, back to about 4.23%, hopefully signaling a halt to the bond market rout that started back in mid-June.

Overnight, Japanese stocks were up a little for a change. European stocks are up about one percent at this hour. And, it looks like we’ll actually start off with a rally for the first time in almost a week. Adjusted for fair value, S&P futures are up 3, Dow futures are up 25 and Nasdaq futures are more than 5 points above fair value.

August 7, 2003

We have a few bits of good news in retailing this morning. Best Buy is raising their earnings estimate for the quarter and the entire year. They are evidently selling a lot of digital televisions and higher-margin stuff. Ann Taylor, also raising earnings guidance for the quarter.

The retailer that sells more stuff than anybody else, Walmart, says that July same-store sales rose 4.6%, that they are targeting 3 to 5% growth in August, and they also are raising their guidance, saying they’ll make 52 cents for the quarter. That’s two cents per share higher than expected.

In fifteen minutes, the preliminary second quarter productivity report is expected to reflect a big increase. Look for an increase of 3.8 percent. Last quarter’s reading was 1.9%.

Asian and European markets sold off overnight and, at this point, we are looking for lower stock prices at 9:30.

Adjusted for fair value, S&P futures are down 3, Dow futures are down 34 and Nasdaq futures are 5 points below fair value.

August 6, 2003

The IRS is on the case. If you think the tax law is confusing, the Service is here to help. They are about to publish Revenue Ruling 2003-72, which establishes a uniform method for determining the proper age of a child. According to this ruling, a child attains a given age on the anniversary of the date the child was born.

Just when you thought that the tax rules were totally incomprehensible – we all may have been a step ahead of the IRS on this one.

People who thought Cisco Systems was going to beat estimates last night were a little ahead of themselves. Cisco met expectations. But like so many companies, they increased profits through cost cutting rather than increasing sales. They did say that they see signs that demand is starting to pick up, but the failure to beat expectations is going to depress shares at the open.

This is one of those funny days when a quick look at the futures could be misleading. The Cisco announcement came last night after the cash market closed, but the futures were still trading. That results in a big fair value adjustment this morning. So although the futures look positive, don’t believe it. After you adjust for fair value, S&P futures are actually down more than 2, Dow futures are down 13 and Nasdaq is looking to open down 10 points.

August 5, 2003

Costco needs your help. Get out there and buy 5 gallons of ketchup. Costco lowered their profit estimate for the quarter from 57 cents to 47 cents, due to higher employee and customer service costs. Costco stock is looking to open about 9% lower this morning.

The bond market finally perked up yesterday. The yield on the 10 year Treasury bond has actually declined almost 3 tenths of a percent from the worst levels of last Friday. However, if you own a long-term Treasury Bond fund, it’s has likely lost somewhere between 9 and 12 percent of its value over the past six weeks. So, if you’re trying to "hide" from stock-market volatility, be careful how you do it.

The ISM Services Index is expected to have pulled back to a level of 58 versus last month’s level of 60. That still indicates expansion in the services industries. We’ll find out shortly after the market opens.

After the market closes today, Cisco Systems will release earnings and presumably talk about prospects for the rest of the year. That report will be widely watched and will set the tone for tomorrow’s open.

At this point, today’s open looks a little weak. Adjusted for fair value, S&P future are down more than 2, Dow futures are down 24 and Nasdaq futures are 5 points below fair value.

August 4, 2003

I hope Mike Tyson doesn’t owe you any money. Once estimated to be worth at least $300 million, old Iron Mike has filed for bankruptcy. Just shows you what a tough economy this has been. Mr. Tyson is reportedly blaming his troubles in part on the lavish life>

At 10 o’clock we’ll find out how much spending has been going on at the nation’s factories. We’re expecting at least a 1.5 percent increase, especially after the strong GDP number from last Thursday.

The bond market may be the most interesting thing to watch today. The ten-year bond now yields about 1.3% more than it did 7 weeks ago. That’s starting to put pressure on stocks of financial companies, not to mention the cold water it’s dumped on the mortgage market.

European markets are doing well at this hour. At this point, adjusted for fair value, S&P futures are up 2 ½ points, Dow futures are up 29 and Nasdaq futures are 5 points above fair value.

August 1, 2003

How about that "Finding Nemo"? It wasn’t Nemo alone, but last night Disney reported earnings for the quarter of 19 cents per share. That beat the 16 cent consensus estimate, and has us, at this point, looking at another rally at the open this morning.

Of course, today is the day we’ll have to fish through at least 7 big economic numbers. That starts at 8:30 this morning with the July Jobs report, Unemployment Rate and report on personal income and consumption. Economists are expecting a small increase in payrolls and a decrease in the Unemployment Rate to 6.3 percent. Let’s hope the news is at least that good with regard to what HAS been happening.

A glimpse of what might be COMING hits at 9:45 the final July University of Michigan Sentiment Index and 15 minutes after that, the July ISM Index. So it’s a big data day, but it’s also a Friday in August, which means volume should be lighter than average. That means news is either direction may lead to a pretty exaggerated move in prices.

At this point, adjusted for fair value, S&P future are up 3, Dow futures are up 25 and Nasdaq futures are 14 points above fair value.

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